Why Roundhill's CHAT ETF Is Outperforming the AI Space in 2026

In 2026, the Roundhill Generative AI & Technology ETF (CHAT) has emerged as a standout performer in the AI sector, outpacing broader market benchmarks and its AI-focused peers. This outperformance is not accidental but a result of strategic positioning, active management, and a portfolio structure that aligns with the explosive growth of generative AI infrastructure. As the AI revolution accelerates, CHAT's concentrated exposure to hyperscalers and semiconductor leaders, combined with its dynamic rebalancing approach, has positioned it to capitalize on the sector's most lucrative opportunities.

Strategic Positioning: Hyperscalers and Semiconductor Giants

CHAT's investment strategy is anchored in its focus on companies at the forefront of generative AI infrastructure, platforms, and software. As of early 2026, the ETF's top holdings include hyperscalers like Alphabet (7.6%), Microsoft (5.1%), Meta (4.2%), and Amazon (3.4%), which collectively drive the majority of global AI infrastructure spending. These companies are not only developing AI tools but also investing heavily in cloud-based AI services, creating a flywheel effect that amplifies their market dominance.

Equally critical to CHAT's success is its exposure to semiconductor firms that power AI workloads. NVIDIA (6.3%), Advanced Micro Devices (3.3%), and Broadcom (3.0%) constitute a significant portion of the ETF's portfolio, reflecting the insatiable demand for high-performance chips in training and deploying generative AI models. This dual focus on hyperscalers and their supply chain partners ensures that CHAT benefits from both the top-line growth of AI-driven services and the bottom-line margins of hardware providers.

Active Management and High Turnover: Adapting to a Fast-Moving Sector

Unlike passive AI ETFs, CHAT employs an actively managed strategy with a high portfolio turnover rate of 92%. This agility allows the fund to swiftly reallocate capital in response to shifting market dynamics, such as surges in hyperscaler capital expenditures (capex) or breakthroughs in AI chip technology. For instance, as cloud providers like Microsoft and Google ramped up AI infrastructure spending in 2025-projected to reach $527 billion in 2026-CHAT's managers increased allocations to semiconductor firms and AI platform developers, locking in gains from these high-growth areas.

The fund's non-diversified structure, holding 49–50 stocks, further enhances its ability to concentrate on the most promising opportunities. While this approach amplifies risk, it also magnifies returns in a sector where a handful of companies dominate innovation and market share. The top five holdings, which account for 26.7% of the portfolio, are strategically selected to capture the compounding effects of AI adoption across industries.

Performance: A 51% Return in 2025, Outpacing the S&P 500

CHAT's strategic bets have translated into exceptional returns. In 2025, the ETF delivered a 51% year-to-date gain, far outperforming the S&P 500's 17% and the Nasdaq-100's 21%. This performance underscores the fund's ability to harness the tailwinds of AI-driven capex cycles. For example, NVIDIA's stock surged as demand for its GPUs in AI training applications exploded, while Microsoft and Alphabet benefited from their leadership in cloud AI services. By maintaining overweight positions in these companies, CHAT amplified its exposure to these growth drivers.

Moreover, CHAT's 0.75% expense ratio is competitive for an actively managed ETF, ensuring that a significant portion of gains flows to investors rather than being eroded by fees. This cost efficiency, combined with its focused strategy, has made CHAT a preferred vehicle for investors seeking concentrated AI exposure.

Risks and Considerations

While CHAT's performance is impressive, its concentrated portfolio and reliance on a narrow set of sectors and companies introduce risks. A slowdown in hyperscaler capex or a downturn in semiconductor demand could disproportionately impact the ETF. Additionally, the fund's active management style requires continuous oversight, and past performance does not guarantee future results. Investors must weigh these risks against the potential for outsized returns in a sector still in its early growth phase.

Conclusion: A Model for AI Investing

Roundhill's CHAT ETF exemplifies how strategic positioning, active management, and sector-specific expertise can unlock exceptional returns in the AI space. By aligning with the hyperscalers and semiconductor leaders driving the AI revolution, CHAT has not only outperformed its peers but also positioned itself to benefit from the multi-trillion-dollar infrastructure buildout expected in the coming years. For investors seeking to navigate the complexities of the AI sector, CHAT offers a compelling case study in how to harness the power of focused, forward-looking investing.